What is Gainsharing? The Basics

Gainsharing is a literal term. As an organization gains, it shares. The typical Gainsharing organization measures performance and through a pre-determined formula shares the savings with all employees. The organization's actual performance is compared to baseline performance (often a historical standard) to determine the amount of the gain. Since gains are measured in relationship to a historical baseline, employees and the organization must change in order to generate a gain. Typical elements of a Gainsharing plan include the following:

• Gains and resulting payouts are self-funded.
• The plan commonly applies to a single plant, site, or stand-alone organization. However, some organizations have levels of sharing across multiple locations or corporation-wide.
• Performance is typically measured across departments/units/functions.
• Measures are commonly narrower and controllable by employees rather than being an organization-wide measure of profits. However, some organizations have measures as broad as profits.
• Payout is often monthly or quarterly.
• Many plans have a year-end reserve fund to account for deficit periods.
• Employees are involved with the design process.
• All employees are eligible for plan payments.
• The bonus is often paid as an equal percentage of compensation or equal cents per hour worked, rather than paid on the basis of individual performance.
• A supporting employee involvement system is part of the plan in order to drive improvement initiatives.